The two formulas
Profit = selling price − cost
Margin % = profit ÷ selling price × 100
Markup % = profit ÷ cost × 100
Example: You buy an item for 600 and sell it for 1,000. Profit is 400. Margin is 400 ÷ 1,000 = 40%. Markup is 400 ÷ 600 = 66.7%. Same item, same profit, two different percentages.
Setting a price from a target margin
Selling price = cost ÷ (1 − target margin ÷ 100)
Example: Cost 700, target margin 30%: 700 ÷ 0.70 = 1,000.
The common mistake is adding 30% to the cost instead: 700 × 1.30 = 910. That is a 30% markup, and it gives only a 23.1% margin.
Conversion table
| Markup | Equals margin |
|---|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
Margin can never reach 100% (that would mean the item cost nothing), but markup has no upper limit.
Worked example: pricing for an online marketplace
Suppose a product costs 800 to buy, 50 to pack and 150 to deliver, so the true unit cost is 1,000. The marketplace charges a 10% commission on the selling price, and you want to keep a 25% margin after that fee.
- Add the fee to the target margin: 25% + 10% = 35%.
- Price = 1,000 ÷ (1 − 0.35) = 1,538.46.
- Check: the fee is 153.85, leaving 1,538.46 − 1,000 − 153.85 = 384.61 profit, which is 25% of the price.
Pricing at 1,250 (a 25% markup on cost) would leave only 125 after the fee — a 10% margin.
Use the calculator
- In the Profit Margin Calculator, choose what you know: cost and price, cost and target margin, or cost and target markup.
- Enter the cost of one unit, including any per-unit costs you want to cover, such as packaging.
- Enter the price, or the margin or markup you want.
- Optionally enter a quantity to see total revenue, cost and profit.
Marketplace fees and discounts
Fees charged as a percentage of the selling price — marketplace commission, payment processing — come straight out of your margin. If a marketplace takes 10% and you need a 25% margin after fees, aim for a 35% margin before them. Include fixed per-order costs such as delivery in the unit cost. Before running a sale, check what a discount does to your margin with the Discount Calculator.
Frequently asked questions
Is gross margin the same as net margin?
No. Gross margin counts only the cost of the goods. Net margin also subtracts overheads such as rent, salaries and advertising.
Which should I use, margin or markup?
Either works if you are consistent. Margin is more common in financial reporting because it relates profit to revenue.